IP For Entrepreneurs - What You Need To Know


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An introduction to intellectual property issues for entrepreneurs and early stage companies

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IP For Entrepreneurs - What You Need To Know

  1. 1. IP for Entrepreneurs—What you Need to Know You have fantastic technology. You have exciting plans to commercialize it. And you have the experience and contacts to make it happen. It’s time to start rolling this out to the marketplace, right? Not so fast. Before you start talking with potential clients or otherwise promoting your product, read this! fr.com Now is the time to develop a plan to protect your intellectual property. e sooner 800-818-5070 you act, the less likely you are to give away your technology to your competitors. info@fr.com Sound extreme? It’s not. Although it may sound far-fetched, all it takes is disclosing your idea to a single person without a nondisclosure agreement, and you could lose forever the ability to protect your technology. Whether you know it or not, your new business’s main asset is probably its intellectual property. Today, up to 75% of the value of public companies comes from intellectual property, or “IP,” and IP is even more important for early-stage companies. If you plan to seek funding, get acquired, or sell shares in your company, protecting your IP is a vital part of building the value of the company. Many people won’t consider buying or investing in a company that does not have in place a plan for protecting its IP and market position. Accordingly, the founders of any new company should familiarize themselves with the four most common forms of IP: patents, trademarks, trade secrets, and copyrights. Building an IP portfolio with the right mix of the various forms of IP will help you protect market share, add value to your company, and position yourself well with investors and acquirers. First, Protect your Technology Patent Protection You can protect your technology with a combination of patents and trade secrets (and, in some cases, copyright, discussed below). A patent is a government-granted monopoly to practice an invention. A patent grants you the right to exclude others from using the invention for 20 years from the filing date or 17 years from the date of grant. In exchange for granting you protection, the government requires that you disclose publicly how to practice the invention. If anyone uses your invention during the patent’s term, you can sue that company for patent infringement. Although comprehensive requirements must be met before the patent office will grant a patent, in simple terms the invention (1) must be new, (2) must be useful, and (3) must have required some ingenuity to create. To get protection in the U.S., you must apply for the patent within one year of telling people about the idea, whether by selling it, marketing it, or otherwise disclosing it. In most other countries, you must apply for patent protection before disclosing the idea.
  2. 2. To get started, contact a business-minded IP attorney who knows how to build a value- driven patent portfolio. If you are on a tight budget (and most new companies are), rate the strategic importance of your inventions and technology on a scale and pursue the most important first. You should also think about your core technologies. Which invention would hurt your business the most if a competitor started selling it today? at invention is the one you should protect first. To keep costs low, you might consider first filing a provisional patent application, a document that describes the invention but in less detail. You have one year after filing a provisional application to file for a patent. A provisional application serves as a placeholder that gives you a year to figure out whether you want to spend the money to file a full application to obtain a patent. Finally, you will need to think about your geographic ambitions. Will you be selling your products overseas? If so, consider filing for a patent on your invention in other countries. Each additional foreign filing will cost money, but if a substantial part of your market resides outside the U.S., you might benefit from having international patent rights. Without filing international patents, you will have no protection outside the U.S. You should do a cost-benefit analysis with your attorney to determine the best course of action for your company. Trade Secret Protection You can also protect your technology by keeping it a trade secret. A trade secret is exactly what it sounds like—a business secret. at secret can be anything from a list of customers to pricing information to ways of making a product. Every state in the U.S. has laws in place that guarantee protection of trade secrets, and requirements for protection differ from state to state. Regardless of the precise requirements of each state, generally a trade secret is something (1) not generally known to the public that (2) confers economic benefit on its holder because it is generally not known and (3) is the subject of reasonable efforts to maintain its secrecy. If a business’s trade secret is stolen, the business may sue for misappropriation of that secret against the individual or company that allegedly stole it. e requirement that you keep the information secret is extremely important. To maintain your trade secrets, you should always have confidentiality or non- disclosure agreements with all people who have access to the secret, including employees, contractors, and actual or potential business partners. If you don’t take this precaution, you risk your secret becoming freely available for anyone to use. Consult your attorney for a good confidentiality or nondisclosure agreement that suits your business needs and jurisdiction. Trade secret protection offers several advantages over patent protection. First, you need not disclose your idea to the public in exchange for the protection. Second, a trade secret endures for as long as you maintain its secrecy, with no expiration date. ird, you do not need to pay for an attorney to draft your patent application or pay the filing fees associated with the patent. However, unlike with a patent, if another company is able to reverse-engineer your product to discover the secret, you will have no ability to stop that company from selling it.
  3. 3. Second, Protect your Brand! Once you have protected your technology, you need to build and protect your brand. Trademarks and service marks identify the source of products and services in the mind of customers and distinguish them from others. A trademark can be a word, name, symbol, or design used in commerce to identify and distinguish the goods of one seller from goods sold by others. Even sounds and colors can serve as trademarks. A service mark is simply a trademark used to identify a service, as opposed to a product. Establishing trademark and service mark protection for your brand allows you to bring a trademark infringement suit against others that copy or offer confusingly similar products or services in the marketplace. To establish trademark or service mark rights in your brand, you must use the “mark” in the marketplace in conjunction with the product or service. For a trademark, that means you must use the mark on the product, container, display, or advertising of the product. For a service mark, you must use the mark in connection with the service. A trademark or service mark can be protected by state and federal law. In addition to rights based on use, federal and state registrations offer added protection. To obtain a federal registration for your mark, you must apply to the U.S. Patent and Trademark Office. To obtain a state registration, you must apply to your state. If you plan to do business nationally or internationally, you should at a minimum seek federal registration and consider international applications as well. If you do not plan to use your mark outside your own state, state registration may be sufficient. However, federal registration offers several benefits that state registration does not. For instance, federal registration creates a presumption that the mark is valid and is owned by the person registering it. Most important, if you bring a lawsuit against a company infringing your mark, a federal registration prevents the alleged infringer from claiming it didn’t know the mark belonged to you—the law presumes that the infringer knew about your mark. State registration, on the other hand, offers little protection beyond creating a limited public record of the use of the mark in the state where it is registered. Registration requirements can vary widely from state to state, so contact your attorney to determine the exact requirements in your state. Finally, do not neglect protecting your brand online. Today, having an online presence is not a luxury, it’s all but a requirement. You should register a domain name that suits your business. In addition to securing rights in the .com domain, you should consider registering the other variants, including .net, .us, .mobi, and any others. If you have established rights in marks associated with your business and somebody is “cybersquatting,” or using a domain name that is confusingly similar, proceedings are available to help resolve this. An IP attorney can help you navigate this process. With the growing importance of Facebook, LinkedIn, and Twitter, you should also consider securing an account using your protected marks on each of these sites.
  4. 4. Third, Protect your Work Product! Copyright protection applies to things like software, manuals, pictures, presentations, drawings, product designs, plans, and just about any other work of authorship. A copyright gives the author or assignee of an original work exclusive right to control the use and dissemination of that work. Copyright allows you to protect a wide variety of work product that otherwise might not be protected. Obtaining copyright protection is simple—the copyright exists immediately upon creation of an original work of authorship and generally lasts for the life of the author plus 70 years. Preserving the copyright is also relatively simple. Marking the work as subject to copyright protection (with one of the following: the word “Copyright,” the abbreviation “Copr.,” or the symbol “©,” along with the date of first publication and the name of the owner) notifies anyone who sees the work of the copyright claim and prevents such a person from avoiding certain damages by claiming to be an “innocent infringer.” is notice further lets the public know who the author is and in what year the work was created, so that a person knows whom to contact to license the work. Copyright claims can also be registered with the U.S. Copyright Office. A federal copyright registration offers several benefits not otherwise available to unregistered copyright owners. First, a work must be federally registered before a lawsuit for copyright infringement can be brought. Second, owners of registered copyrights can obtain “statutory” damages, attorneys’ fees, and legal costs in a lawsuit. An award of statutory damages means that the copyright owner need not prove harm from the copying. Statutory damages are discretionary and will depend upon how willful and harmful the infringement was—the more deliberate and damaging the infringement, the higher the award. To receive this benefit, the copyright application must be filed prior to an infringement taking place or within three months from the publication date of the work. Finally, federal registration creates the presumption that the work is original and is owned by the registrant of the copyrighted work. For this benefit to apply to an owner, that owner must register the copyright within five years of the first publication. Conclusion When starting your business, IP protection should be one of the first things on your mind. As a business owner, you should learn about the various forms of IP and understand how to protect them at the state and federal level. If you are not diligent in protecting your IP, you may unwittingly lose the ability to guard some of your most valuable assets. If you educate yourself and plan ahead, however, you can build an IP portfolio that has long-term value by protecting your technology, your brand, and your work product. Dan Kent Jim McDonough 404-724-2828 404-724-2784 dak@fr.com jim@fr.com